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The Aussie was the biggest mover of the forex trading session, as it got swept away by the tides of strong Australian reports and weak Chinese data.

  • New Zealand overseas trade index (q/q) jumps by 5.1% vs. 4.0% expected, 5.8% previous
  • Japanese capital spending (q/y) improves from 3.8% to 4.5% vs. 3.9% expected
  • Japanese final manufacturing PMI revised higher from 52.0 to 53.1
  • Australia AIG manufacturing index slips from 59.2 to 54.8 in May
  • Australian private capital expenditure (q/q) 0.3% vs. 0.4% expected, -1.0% previous
  • Australian retail sales surprises with 1.0% growth vs. 0.3% expected, -0.2% previous
  • Chinese Caixin manufacturing PMI slips to 49.6 vs. 50.2 expected, 50.3 previous

Major Events/Reports

Australia’s retail sales surprise

Retail sales in Australia recovered sharply in April after seeing two consecutive monthly decreases.

Apparently, purchases had grown by a solid 1.0% from a month earlier – the fastest since September 2014 – thanks to higher demand for department store products (+2.5%), food sold by cafes and restaurants (+1.2%), and takeaway food services (+1.1%). Analysts had only expected a 0.3% uptick.

On an annualized basis, retail purchases have grown by 2.7%, higher than the 2.5% growth seen in March.

The upside surprise is good news for the RBA and market watchers, who are worried that higher borrowing rates and weak wage growth for Australians are translating to less spending.

Of course, it also doesn’t hurt that sales has grown by 0.1% in April following similar gains in February and March.

China’s Caixin manufacturing PMI

Just as the Aussie’s rally was gaining momentum, China printed a worse-than-expected PMI report.

Remember that, unlike the official numbers, Caixin’s manufacturing PMI surveys focus more on small and medium-sized companies. And, because it’s immune (I hope) to possible government hocus-pocus, it’s also usually more closely-watched than the official release.

Unfortunately, the report said that May’s numbers signalled “renewed deterioration in operating conditions.” See, the index fell from 50.3 to a contractionary figure of 49.6 in May, a first since June 2016.

Details reveal that slower increases in output and new orders, as well as higher staff turnover and subdued demand led up to renewed declines in manufacturing activity. Yikes!

The report showed a sharp contrast against the government’s release, which reflected higher manufacturer optimism on the back of increased construction and infrastructure investment. Take note, however, that the goverment’s numbers focus more on larger manufacturers.

Major Market Mover(s):

AUD

The Aussie shot up as soon as Australia released a better-than-expected retail sales report. The tides turned, however, as soon as China’s non-official manufacturing PMI missed estimates.

AUD/USD hit a session high of .7455 before settling back down to .7395 while AUD/JPY popped up to 82.72 before falling down to 82.05.

Watch Out For:

  • 5:45 am GMT: Swiss GDP (q/q) (0.5% expected, 0.2% previous)
  • 6:00 am GMT: U.K. Nationwide house price index (0.2% expected, -0.4% previous)
  • 7:15 am GMT: Swiss retail sales (y/y) (2.4% expected, 2.1% previous)
  • 7:15 am GMT: Spanish manufacturing PMI (54.9 expected, 54.5 previous)
  • 7:30 am GMT: Switzerland manufacturing PMI (57.8 expected, 57.4 previous)
  • 7:45 am GMT: Italian manufacturing PMI (56.1 expected, 56.2 previous)
  • 7:50 am GMT: French final manufacturing PMI expected to remain at 54.0
  • 7:55 am GMT: German final manufacturing PMI expected to remain at 59.4
  • 8:00 am GMT: Euro Zone final manufacturing PMI expected to remain at 57.0
  • 8:30 am GMT: U.K. manufacturing PMI (56.5 expected, 57.3 previous)